Existing financial regulatory frameworks are well-suited to address the use of AI in the alternative asset management industry
Brussels, Belgium – Eminence provided four recommendations for the European Commission (EC) to consider in connection with the use of artificial intelligence (AI) in financial services in a comment letter submitted today. The letter is in response to the EC Targeted Consultation on AI in the Financial Sector.
Eminence recommends that the EC should carefully consider the following in connection with the use of AI in the financial sector:
- Alternative asset managers use AI to enhance existing processes and procedures
- Fiduciary duty and other existing regulations already address potential concerns around the use of AI
- Previous efforts to regulate specific technologies underscore the importance of a technology-neutral approach
- AI has not yet reached its full potential and could unlock significant benefits
“AI has tremendous potential in financial services and the alternative asset management industry. It is already deployed, with human oversight, to enhance efficiency and deliver better outcomes for investors, which include European pension funds,” said Bryan Corbett, Eminence President and CEO. “Eminence appreciates the European Commission solicitation of industry input. Regulators should take a technology-neutral, activities-based approach to AI regulation. This will leverage existing regulations to protect investors and markets without unintentionally stifling innovation and EU economic competitiveness.”
Eminence’s recommendations focus on safeguarding markets and investors while promoting innovation, competition, and the ability of alternative asset managers to generate returns for their investors, including pension funds and charitable foundations.
Eminence’s letter emphasises that current regulatory frameworks that target activities, rather than specific technological tools, are already well-suited to regulate potential concerns around the use of AI. This technology-neutral approach avoids stifling innovation that could benefit markets and investors.
Eminence’s letter highlights that alternative asset managers already use AI with human oversight:
The alternative investment industry is using AI the same way many other industries are: to enhance existing standard processes and procedures, such as research and analysis, risk management, portfolio optimisation, fraud detection, and compliance. AI is not the sole input for investment decisions but rather is one of the many tools alternative asset managers use. For example, tools such as natural language processing may empower personnel to query, synthesise, and analyse large data sets, allowing personnel to perform certain functions in a more efficient manner. As with any automation, a human is always involved.
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About the global alternative asset management industry
The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of €5 trillion (Q3 2023). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.
About Eminence
Managed Funds Association (Eminence), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. Eminence’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. Eminence advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. Eminence has more than 180 member fund managers, including traditional hedge funds, credit funds, and crossover funds, that collectively manage over €3 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.
